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Asset Allocation Committee Outlook

2Q 2021
Webinar | Asset Allocation Committee Outlook 2Q 2021: The Temperature’s Rising
Listen to Erik Knutzen and Ashok Bhatia discuss some of the key themes from this quarter's outlook. Access Replay
The Temperature’s Rising
“Markets have moved decisively, consistent with our recent views. If the balance in a portfolio has tipped too far in favor of these pro-recovery exposures, our views may infer some profit-taking to rebalance, particularly as long-duration exposures such as nominal government bonds and large-cap growth stocks look less vulnerable to us now than they did before the recent run-up in rates.”

—Erik L. Knutzen, CFA, CAIA, Chief Investment Officer—Multi-Asset Class

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Commentary

The first quarter of 2021 brought what we expected: a new U.S. administration and a new fiscal stimulus; the beginnings of the global vaccination program that should ultimately consolidate the re-opening of our economies; improving economic data worldwide; outperformance from commodities and from small-cap, value and cyclical stocks, with occasional volatility concentrated in large-cap growth; and a sell-off, albeit stronger than we anticipated, in Treasuries. As it looks to the next six to 12 months, the Asset Allocation Committee (“the AAC” or “the Committee”) faces two questions. Do we think the economy will overheat, pushing bond yields to levels that unsettle equity markets or even force central banks to stifle the recovery? And have markets moved enough to justify some rebalancing of last quarter’s views? Our answers are “no” and “yes,” respectively, but we maintain a hawkish eye on the economic data—and particularly the inflation thermometer.

In our last Asset Allocation Committee Outlook, our main concern was the high levels of optimistic consensus. We followed the consensus with our positive views on commodities, small caps, value and cyclical stocks, and with our concerns over the vulnerability of core government bonds. We expressed those views moderately, however, as we thought there was still enough uncertainty and potential volatility to offer “more opportunities to lean into the recovery as it develops.”

We got the outperformance from “recovery assets” and the sell-off in Treasuries that we expected. We also got the volatility—equity markets stumbled at the end of January and again at the end of February. Where we were surprised, it was by the speed and extent of the rise in Treasury yields and the relative shallowness of the equity market dips.

This is an important dynamic, as it tells us a lot about the forces behind the AAC’s first big question: How likely is it that Treasury yields could run out of control?

Sharp Increase in Rates May Moderate

Since closing at 52 basis points on August 4 last year, the U.S. 10-year Treasury yield has risen rapidly to its recent high above 1.75%. More than half of this move has come in the past three months. While that has knocked several percentage points from the value of many fixed income portfolios, and reintroduced some volatility into equity markets, particularly among longer-duration large-cap growth stocks, it has not stopped the S&P 500 Index from reaching record highs.

Rising interest rates can have a negative effect on the valuations of risky assets, but that is not always the case because the main cause of higher rates is not always the same. Long-term rates are chiefly determined by expectations for economic growth, expectations for inflation and the level of uncertainty about the future path of short-term rates. History suggests that risk assets tend to fare poorly when yields rise as part of the tightening of financial conditions associated with new uncertainty about monetary policy, as they did during the “Taper Tantrum of 2013.” When they rise because of stronger growth and closing output gaps, however, as they did during the winter of 2001, the summer of 2003, the spring of 2011 and the winter of 2010 – 11, risky assets have tended to perform well or at least maintain their levels.

For the next two or three years, we anticipate above-trend economic growth, supported by fiscal stimulus, high household savings, robust corporate balance sheets and the changed consumption patterns associated with a likely continuation of “hybrid” on-site and remote working. The Federal Reserve recently revised its 2021 U.S. growth forecast up to 6.5%, in line with the OECD’s new projection, following confirmation of the Biden administration’s new fiscal stimulus. At the same time, overall financial conditions are likely to remain exceptionally easy. Even Treasury yields at today’s higher levels remain low by historical standards, while equity markets are buoyant and credit spreads are tight.

The Rapid Rise in Nominal Treasury Yields Has Not Tightened Overall Financial Conditions
The Rapid Rise in Nominal Treasury Yields Has Not Tightened Overall Financial Conditions 
Source: Bloomberg. Data as of March 31, 2021. For illustrative purposes only. Past performance is no guarantee of future results.
A Taperless Tantrum

With growth rates high, financial conditions accommodative and output gaps closing, we anticipate higher inflation over the next few years—in line with the 2.0 – 2.5% levels seen in some years following the financial crisis.

The Federal Reserve reasserted at its March policy meeting a commitment to targeting long-run average inflation of 2% rather than a current rate of 2%, and a determination to respond to actual economic data rather than forecasts—including forecasts implied in financial markets. Taken together, this gives us a “reactive” central bank as opposed to the old, “pre-emptive” model. Before it tightens policy, it appears that the Fed will need to see very strong evidence that inflation is problematically high, in the 3 – 4% range, and structural rather than temporary.

So far, the Treasury market has not priced for this kind of outcome. Some of the more volatile, short-term market-derived inflation expectations have risen above 2.5%. For comparison, however, the five-year breakeven inflation rate starting in five years’ time, which is the Federal Reserve’s favored indication of the market’s long-run average inflation expectations, is still only just above 2%.

In addition, the uniqueness of the current environment is likely to give the Fed exceptional latitude to stay on the sidelines. We believe the low base set last year makes it much easier to dismiss high inflation this year as a statistical aberration. A dearth of spending on services in 2020 is likely to be contrasted with a splurge of pent-up consumption in the summer of 2021. A spree on durable household goods and computer equipment in 2020 is likely to be contrasted with indulgence on holidays and nights out in 2021. Most banks and many corporations and consumers are coming out of recession with unusually robust balance sheets. When the economic data is so abnormal, not acting upon it is easily presented as prudent.

Long-Run Average Inflation Expectations Remain Close to the 2% Target Even as Medium-term Expectations Rise
Long-Run Average Inflation Expectations Remain Close to the 2% Target Even as Medium-term Expectations Rise 
Source: FactSet. Data as of March 31, 2021. For illustrative purposes only. Nothing herein constitutes a prediction of future economic or market environments. Due to a variety of factors, actual events, including the characteristic of economic or market environments may vary significantly from any views expressed. Past performance is no guarantee of future results.

Putting all of this together, there is consensus on the Committee on three important points.

The first is that the sell-off in nominal Treasuries may have happened faster than is warranted by current conditions; we anticipate more two-way trading and less momentum in Treasuries from now on. In particular, we believe a U.S. 10-year yield in the current range is high enough to attract euro- and yen-based investors, which is likely to be a significant headwind to much higher rates.

The second is that, even if the U.S. 10-year yield were to push to 2% or higher, that alone would be insufficient to elicit more hawkish rhetoric from the Fed; by contrast with the 2013 “Taper Tantrum,” we think 2021 will be remembered for its “Taperless Tantrum.”

And the third point of consensus is that the Fed is likely correct to forecast a spike in inflation this year followed by a return to 2.0 – 2.5% thereafter.

Consensus does not mean unanimity, and every Committee member emphasizes the importance of a close watch over the economic data. Over the coming months, some of that data could hit levels unseen for 40 or 50 years, unsettling markets. On the whole, however, those three assumptions underpin this quarter’s decisions on our asset allocation views.

Rebalancing—But Staying the Course

These assumptions support a continuation of our pro-risk and pro-cyclical stance. The improving growth outlook is feeding into earnings forecasts: for the S&P 500, the analysts’ consensus is now for $200 per share this year, up more than 40% on 2020’s results. Were the 10-year U.S. Treasury yield to top out below 2.25%—a level we faced in early summer 2019, when the U.S. was growing at 2.2% rather than 6.5%—the effect on valuation multiples would be highly unlikely to wipe out the big boost to earnings.

As such, we maintain overweight views on equities and credit over core government bonds; U.S. small caps over large caps; non-U.S. over U.S. equities; and commodities and private markets over hedged strategies. The Committee continues to favor cyclical over defensive sectors and value over growth stocks.

That said, markets have moved decisively, consistent with these views over the past two quarters. As well as the jump in Treasury yields, 12-month trailing performance data in general is beginning to show remarkably big numbers. As of March 31, 2021, The Russell 2000 Index of small caps is up almost 95% over that period, almost 35 percentage points ahead of the Russell 1000 Index. The Russell 1000 Growth Index still leads the Russell 1000 Value Index over 12 months, but the Value Index has already raced ahead by more than 10 percentage points since the start of 2021. The Bloomberg Barclays Global High Yield Index is up almost 25% over 12 months, versus less than 5% from the Global Aggregate Index. The price of copper has doubled.

That brings us to our second question: Have markets moved enough to justify some rebalancing of last quarter’s views?

We have seen enough to change a few of our headline views. The AAC has moved investment grade fixed income up from an underweight to a neutral view: we have upgraded what we regard as oversold Treasuries, and even as spreads have tightened on high grade credit, we recognize new opportunities in some longer-duration bonds as a result of higher yields. The pronounced underweight view on non-U.S. developed market debt has also been eased, given the move in yields.

For the most part, however, our views might infer more subtle changes to asset allocation weights, depending on the balance within individual portfolios. For example, if the outperformance of small caps, value, non-U.S. markets, high yield and commodities has tipped these exposures out of balance, then taking profits on the margin may appear prudent, particularly as long-duration exposures such as nominal government bonds and large-cap growth stocks look less vulnerable to us now than they did before the recent run-up in rates. Overall, however, we are staying the course with our key views from the start of the year.

We also continue to anticipate potentially pronounced periods of volatility, which could be used to lean portfolios further into pro-recovery allocations as the year unfolds. While the Fed’s firm messaging may reduce some uncertainty, economic data surprises could increase it; and the Committee notes a range of other live risks, from a flare-up in relations with China to a taxation sticker shock, an attack on the U.S. Congressional filibuster or a partisan tussle over the third-quarter U.S. debt ceiling.

For now, it appears that the leading concern for investors is the recent momentum behind Treasury yields and what it implies for inflation and the trajectory of central bank policy over the next 12 to 24 months. The temperature is rising, and the summer could bring some very hot data. Like other summer heatwaves, we expect this one to be the topic of a lot of conversation, but cause only temporary discomfort—although we will be keeping a very close eye on the thermometer.

Fixed Income Market Views
Fixed Income
Regional Fixed Income
Investment Grade Fixed Income
  • The Asset Allocation Committee (“AAC” or “the Committee”) upgraded its overall view from underweight to neutral.
  • Government bonds appear less risky and subject to more two-way trading after the recent run-up in yields.
  • Conservative balance sheet management is positive for investment grade credit, and while spreads are unlikely to tighten much further, higher yields have opened up some new opportunities in longer-duration corporate bonds.
Developed Market Non-U.S. Debt
  • The Committee upgraded the asset class to underweight from its previous, very underweight view.
  • Yield curves remain suppressed and flat and there is scope for interest-rate volatility in the earlier stages of economic recovery: the view remains underweight, but the recent run-up in yields has made these markets less risky than they were at the beginning of the year.
High Yield Fixed Income
  • The Committee maintained its overweight view.
  • An environment of low rates and conservative management of corporate balance sheets will be supportive of credit markets in general.
  • Our estimate for the default rate over the next 12 months has declined meaningfully since the height of the crisis.
  • While not affecting credit spreads, in our view the recent run-up in Treasury yields has created value in higher quality issuers, particularly “fallen angels” that have the potential to become upgraded “rising stars” over the coming 12 – 24 months.
Emerging Markets Debt
  • The Committee maintained its overweight.
  • Because emerging markets debt indices are heavily weighted to Latin American countries struggling with coronavirus and recent U.S. dollar strength, the asset class appears to be trading relatively cheaply.
  • Economic growth and commodity strength should be supportive of emerging markets fundamentals and ultimately overwhelm the potential headwinds triggered by higher rates or a stronger U.S. dollar, particularly in hard currency bonds.
  • With the major exception of the China onshore market, we are more cautious on local currency bonds in light of higher inflation and a shift to tighter monetary policy, as well as rising risk premia in response to several large fiscal stimulus packages.
Global Equity Market Views
Equity
Regional Equity
U.S. Equities
  • The Committee maintained its underweight view on U.S. large caps and its overweight view on U.S. small and mid caps.
  • U.S. large caps, particularly the secular growth stocks that led last year’s recovery, have lagged since the start of the year mainly over concerns about their exposure to rising interest rates—although the AAC regards them as less risky after the recent run-up in Treasury yields.
  • Large-cap cyclical and value stocks have outperformed, however, and could continue to do so as economies begin to open up fully later in the year.
  • The AAC also believes a tilt toward higher quality small caps is justified as economic recovery takes hold.
  • The AAC anticipates opportunities to add risk in small caps, value stocks and cyclical stocks during potential periods of volatility as the recovery develops.
Non-U.S. Developed Market Equities
  • The Committee maintained its overweight view.
  • U.S. large caps have led the rapid recovery in financial markets and now appear fully valued, whereas Japanese and European equities remain relatively cheap and are also more highly geared to global trade and the general economic recovery anticipated in 2021.
  • On the margins, the AAC favors Japan, where big changes in management attitudes to shareholder value are creating substantial opportunity, over Europe, where countries are struggling with a new wave of coronavirus infections and a difficult vaccine rollout.
Emerging Markets Equities
  • The Committee maintained its overweight view.
  • Emerging markets are highly geared to global trade and the general economic recovery anticipated in 2021.
  • China and Asia more broadly stand out as sources of high-quality exposure to global economic recovery.
  • Emerging markets equities could benefit from U.S. dollar weakness, which we anticipate on a 12- to 18-month view, although caution on this continues to be warranted in the immediate term.
  • The AAC anticipates opportunities to add risk during the potential volatility of the early stages of economic recovery.
Real and Alternative Asset Market Views
Real and Alternatives Asset
Currency
Commodities
  • The Committee maintained its overweight view.
  • Commodities could provide exposure to a surge in pent-up demand from consumers and manufacturers as uncertainty lifts next year.
  • Gold and other precious metals could serve as a haven during any periods of uncertainty in the early stages of the economic recovery, as well as a hedge against fiat currency depreciation—although caution is warranted given the strength of the U.S. dollar so far this year.
Hedge Funds
  • The Committee maintained its underweight view.
  • After providing much-needed ballast for portfolios through the worst of the coronavirus crisis, the major liquid alternative strategies have less of a role to play as the recovery gains a firmer footing.
  • Opportunities are growing in merger arbitrage and distressed.
  • Some uncorrelated strategies, such as insurance-linked securities, could still provide useful diversification over the anticipated volatility of the coming months.
Private Equity
  • The Committee maintained its overweight view.
  • Very few transactions are being completed in companies that are highly exposed to coronavirus risk, which means that current deals are mainly in robust businesses.
  • While that raises concerns about valuations, the operational enhancements that private equity can bring could be an effective tool for mitigating that risk.
  • There are emerging opportunity sets in co-investments and arguably a multi-year value opportunity in private equity secondaries.
Private Debt
  • The Committee initiated an overweight view.
  • While some portfolios may be exposed to legacy assets affected by the coronavirus crisis, those focused on higher quality assets have fared well and are positioned to benefit from of favorable current conditions.
  • As during the period following the financial crisis of 2008 – 09, traditional lenders are likely to be less active and leave more market share to private debt funds, while risk-averse private equity managers are putting more equity into deals, thereby creating a deeper loss-taking cushion beneath leveraged lenders.
Private Real Estate
  • The Committee initiated a neutral view.
  • Vulnerability to the coronavirus fallout in sectors such as retail and offices is likely to be at least partially offset by potentially significant opportunities in sectors such as warehouses, “last-mile” storage and datacenters that are geared to the new working- and shopping-from-home era.
  • Significant dislocations across these sectors create opportunities at the property and project level.
Currencies
USD
  • The AAC maintained its underweight view.
  • The currency is still overvalued based on purchasing power parity (PPP) metrics and faces headwinds from accommodative monetary policy, the compression of rate differentials with the rest of the world and the U.S.’s twin deficits.
  • The dollar could benefit from this being a U.S.-led recovery, however, and in the earlier stages uncertainty or potential volatility could also result in short-term dollar rallies.
EUR
  • The AAC maintained its neutral view.
  • The euro tends to be positively geared to global economic activity, particularly relative to the U.S. dollar; it benefits from a large current account surplus; and the installation of Mario Draghi as Italy’s Prime Minster has reduced political risk.
  • The view remains marginal as the already accommodative European Central Bank is unlikely to tolerate further threats to its inflation target from an overly strong currency, markets are already long the euro, and the region is struggling to re-open under a new wave of coronavirus infections and a stuttering vaccination program.
JPY
  • The AAC maintained its overweight view.
  • Both PPP and real exchange rates suggest the JPY is undervalued, while very low yields globally now make Japan’s low rates less discouraging, and hedged foreign investments are at their most attractive levels for years for JPY-based investors.
  • Continued funding stress in Japan and a consolidation of investor risk appetite as the recovery takes hold could be negative for the yen.
GBP
  • The AAC maintained its overweight view.
  • The market has clarity on Brexit, the recent U.K. budget is growth-supporting this year, the country’s vaccination program has been a success, and the GBP still appears undervalued based on PPP measures.
CHF
  • The AAC maintained its underweight view.
  • The Swiss franc is still very overvalued on PPP measures, market participants remain very long in their positioning, the installation of Mario Draghi as Italy’s Prime Minster has reduced political risk in the eurozone, and the CHF remains one of the most attractive funding currencies for global carry trades as global yields rise.
Up For Debate
Where in the world for cyclical recovery exposure?

The Asset Allocation Committee (“the AAC” or “the Committee”) favors non-U.S. over U.S. large-cap equity markets, as well as emerging markets debt as part of its preference for credit over core government bonds. Its view on where the marginal dollar of non-U.S. allocation should go is informed by a number of factors, including what has been happening with U.S. inflation expectations and their implications for the strength of the dollar.

The dollar has strengthened so far this year, but it is very difficult to disaggregate the causes of that strength. Nominal U.S. yields have soared, but real yields and short rates have lagged, pushing up breakeven inflation rates. So, has the dollar strengthened in response to higher nominal yields and breakevens, or is there much more to come in the event that real yields and short rates catch up? Is the strength a reflection of stimulus-boosted U.S. growth expectations for this year, or a dramatic mispricing of its ballooning twin deficits?

On a 12-month view, the Committee currently downplays the risk of unmanageable inflation and expects nominal yields to come back in line with real yields and short rates. But it also recognizes that, unlike a decade ago, this economic recovery will likely be U.S.- rather than China-led. A substantially stronger dollar is not our central outlook, then, but it is a significant risk.

That makes the Committee marginally less favorable toward emerging markets equity and local currency debt, whose exposure to dollar strength has shown up in relatively poor performance so far this year. A systemic failure in a major emerging market is one of the tail risks for 2021 identified by some Committee members—with renewed questions over the independence of Turkey’s central bank currently making it the prime candidate. Asia and especially China are preferred over Latin America, reflecting a likely bigger benefit from the U.S. fiscal stimulus and revival in U.S. consumer spending. Higher inflation, a shift to tighter monetary policy and rising risk premia in response to several large fiscal stimulus packages adds to the dollar-related pressures in local currency bonds. Where we have upgraded our view on emerging markets debt, it is on dollar-denominated bonds.

European markets also look less favorable than they did a few months ago, as a number of countries struggle with a third wave of coronavirus infections and a stuttering vaccination program, as well as a lack of fiscal firepower relative to what the U.S. has mustered.

That leaves Japan as our most favored non-U.S. market. The TOPIX Index, up some 10% this year, has almost kept pace with U.S. small caps. Japan’s exporting manufacturers are geared to a global cyclical recovery and many trade at relatively attractive valuations. Unlike many emerging markets, they generally benefit from a stronger dollar and weaker yen, as U.S. consumption sucks in imports. Perhaps most interestingly, the country’s corporate management appears to be experiencing a quiet revolution in attitudes to shareholder value. A growing number of activist events has started to make management much more responsive to shareholder proposals. We believe the recent success of Neuberger Berman’s own Japan equity engagement team is testament to that trend. Both they and Neuberger Berman’s private equity team in Japan see a lot of opportunities where capital expenditure remains modest and costs can be reduced—and where management has become much more open to new ownership and new ideas.

What is the opportunity in private credit?

This quarter saw the Asset Allocation Committee (“the AAC” or “the Committee”) add private debt to its list of discrete asset classes.

Private debt is a broad and diverse category encompassing investments across a spectrum of corporate credit, asset-backed, and real estate lending. One important area of the private debt universe is first-lien debt financing of private equity leveraged buyouts (LBOs). This category is quite distinct from private equity: its maturities are short relative to the average lifecycle of a private equity investment, it generates regular interest cash flows, and it is senior to and therefore less risky than equity. Its illiquidity, the way it is originated, and its risk-and-return profile also make it quite distinct from public high yield bonds and bank loans. In addition, it is finding its way into more and more investor portfolios as income with limited interest rate risk has become harder to find in traditional fixed income asset classes. Whether as a standalone allocation or as part of a full-spectrum, flexible, public-to-private credit strategy, this segment of private debt is becoming an important part of the investor toolkit.

The Committee opted for an overweight view for this category to reflect the fact that, while some private debt portfolios are struggling with legacy assets in sectors badly affected by the coronavirus crisis, those focused on higher quality assets have fared well and are positioned to take advantage of favorable current conditions.

The supply of lending opportunities is promising. The last five years were very successful for private equity fundraising, and because private equity dealmakers have been unable to travel for a year there is some $500 billion of dry powder waiting to be deployed in U.S. buyouts, all of which will need to be leveraged with debt. After the global financial crisis of 2008 – 09, it took five years for traditional bank lending to return to pre-crisis levels; we think the fallout from the coronavirus crisis may leave a similarly big slice of the market open to private debt funds.

The risk profile is also attractive. Let’s look again at the post-financial crisis era. After hitting almost six-times EBITDA in 2007, the debt deployed in the average mid-market LBO fell to just three-times in 2009, and leverage stayed below pre-crisis levels for another three years. Private equity investors generally wanted less leverage because they were more cautious, but also because lenders demanded more compensation for their risk. The net result was higher risk-adjusted returns to private lending. We believe similar conditions could prevail over the coming years, consolidated by a general turn away from a reliance on excessive leverage and toward more active management among private equity managers.

We believe this makes it possible to earn attractive yields from high quality assets, on top of a large cushion of loss-taking equity, with floating rates offering a potential buffer against the threat of rising Treasury yields.

OUTLOOK
The Asset Allocation Committee Outlook
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Asset Allocation Committee
About the Members
Neuberger Berman’s Asset Allocation Committee meets every quarter to poll its members on their outlook for the next 12 months on each of the asset classes noted and, through debate and discussion, to refine our market outlook. The panel covers the gamut of investments and markets, bringing together diverse industry knowledge, with an average of 26 years of experience.
Joseph V. Amato
President and Chief Investment Officer—Equities
26 Years of Industry Experience
26 Years with Neuberger Berman
Erik L. Knutzen, CFA, CAIA
Chief Investment Officer—Multi-Asset Class
36 Years of Industry Experience
7 Years with Neuberger Berman
Ashok Bhatia, CFA
Deputy Chief Investment Officer—Fixed Income
28 Years of Industry Experience
4 Years with Neuberger Berman
Thanos Bardas, PhD
Co-Head of Global Investment Grade Fixed Income
23 Years of Industry Experience
23 Years with Neuberger Berman
Joseph V. Amato, President and Chief Investment Officer—Equities

Joseph V. Amato serves as President of Neuberger Berman Group LLC and Chief Investment Officer of Equities. He is a member of the firm’s Board of Directors and its Audit Committee. His responsibilities also include overseeing the firm’s Fixed Income business. 

Previously, Joe served as Lehman Brothers’ Global Head of Asset Management and Head of its Neuberger Berman subsidiary, beginning in April 2006.  From 1996 through 2006, Joe held senior level positions within Lehman Brothers’ Capital Markets business, serving as Global Head of Equity Research for the majority of that time.  Joe joined Lehman Brothers in 1994 as Head of High Yield Research.  Prior to joining Lehman Brothers, Joe spent ten years at Kidder Peabody, ultimately as head of High Yield Research. 

He received his BS from Georgetown University and is a member of the University’s Board of Regents and the Business School’s Board of Advisors. He is also Co-Chair of the New York City Board of Advisors of Teach for America, a national non-profit organization focused on public education reform.

Erik L. Knutzen, CFA, CAIA, Chief Investment Officer—Multi-Asset Class
Erik Knutzen, CFA, CAIA and Managing Director, is Co-Head of the Neuberger Berman Quantitative and Multi-Asset Class investment team and Multi-Asset Class Chief Investment Officer. Erik joined in 2014 and is responsible for leading the management of multi-asset portfolios, driving the asset allocation process on a firm-wide level, as well as engaging with clients on strategic partnerships and multi-asset class and quantitative solutions. Previously, Erik was with NEPC, LLC where he served as chief investment officer since 2008. As CIO, he oversaw a group of more than 45 investment professionals, including dedicated research teams focused on Alternative Investments, Traditional Strategies and Asset Allocation for NEPC’s client base with, collectively, more than $800 billion in assets under advisement. He has over 25 years of experience in the financial services industry, including nine years at Putnam Investments. In 2013, he was recognized by aiCIO magazine, ranking atop their 25 most influential investment consultants. Erik holds an MBA from Harvard Business School and a BA from Williams College. He has been awarded the Chartered Financial Analyst designation, as well as the Chartered Alternative Investment Analyst designations. Erik sits on the Boards of the Massachusetts Audubon Society, where he is a member of their Investment Committee, and of Start Small Think Big.

Ashok Bhatia, CFA, Deputy Chief Investment Officer—Fixed Income
Ashok K. Bhatia, CFA, Managing Director, joined the firm in 2017. Ashok is the Deputy Chief Investment Officer for Fixed Income. He is a lead portfolio manager on multi-sector fixed income strategies and is also a member of the Multi-Asset Class portfolio management team, the Fixed Income Investment Strategy Committee and the firm’s Asset Allocation Committee. Previously, Ashok has held senior investment and leadership positions in several asset management firms and hedge funds, including Wells Fargo Asset Management, Balyasny Asset Management, and Stark Investments. Ashok has had investment responsibilities across global fixed income and currency markets. Ashok began his career in 1993 as an investment analyst at Morgan Stanley. Ashok received a BA with high honors in Economics from the University of Michigan, Ann Arbor, and an MBA with high honors from the University of Chicago. He has been awarded the Chartered Financial Analyst designation.
Thanos Bardas, PhD, Co-Head of Global Investment Grade Fixed Income
Thanos Bardas, PhD, Managing Director, joined the firm in 1998. Thanos is the Global Co-Head of Investment Grade and serves as a Senior Portfolio Manager on Global Investment Grade and Multi-Sector Fixed income strategies. He sits on the firm’s Asset Allocation Committee and Fixed Income’s Investment Strategy Committee, and is a member of the Fixed Income Multi-Sector Group. Thanos also leads the Global Rates team in determining rates exposure across various portfolio strategies and oversees both inflation and LDI investments. Thanos graduated with honors from Aristotle University, Greece, earned his MS from the University of Crete, Greece, and holds a PhD in Theoretical Physics from State University of New York at Stony Brook. He holds FINRA Series 7 and Series 66 licenses.
Timothy F. Creedon, CFA
Director, Global Equity Research
23 Years of Industry Experience
21 Years with Neuberger Berman
Alan H. Dorsey, CFA
Chief Investment Officer of Neuberger Berman Trust Company
15 Years with Neuberger Berman
Tokufumi Kato, PhD
Managing Director
12 Years with Neuberger Berman
Hakan Kaya, PhD
Senior Portfolio Manager
15 Years of Industry Experience
14 Years with Neuberger Berman
Timothy F. Creedon, CFA, Director, Global Equity Research
Timothy Creedon, CFA, Managing Director, joined the firm in 2005 and has been the Director of Research for the Global Equity Research Department since 2011. Tim previously served as an equity analyst covering Consumer companies for the firm. Before that, he worked at Lehman Brothers, also covering consumer stocks, and worked in the Private Equity group at Lehman Brothers, where he was responsible for analyzing and executing investments in early-stage telecom/media companies. Tim began his career at Merrill Lynch, where he worked in Investment Banking, covering the Communications industry. He is a CFA charterholder and graduated magna cum laude from Georgetown University’s School of Foreign Service with a concentration in International Economics. Tim is a member of the firm’s Operating Committee and Investment Risk Committee, and he also serves on the Board of Room to Grow in New York City.
Alan H. Dorsey, CFA, Chief Investment Officer of Neuberger Berman Trust Company
Alan H. Dorsey, CFA, Managing Director, joined the firm in 2006. Alan is Chief Investment Officer - Wealth Management & Neuberger Berman Trust Company, and he is a member of the firm’s Asset Allocation Committee. He most recently served as the firm’s Chief Risk Officer and previous to that as Head of Investment Strategy. Formerly, Alan was managing director and director of Non-Traditional Investments and Research at RogersCasey, a leading consultant to pension funds and other institutional investors. In this role, he had responsibility for managing research and investment teams pertaining to hedge funds, private equity, real estate, and hard asset investing. He was also director of research for Bryant Park Capital and its affiliates, focusing on investment banking for, and proprietary investment in, middle-market companies. Alan began his career as a securities analyst at Dillon Read & Co. and Argus Research Corp. He holds a BA in Economics from Wesleyan University, and has been awarded the Chartered Financial Analyst designation. From 1997 through 2007, he served as a member of the investment committee of the endowment for Wesleyan University, where he is a past trustee. He is also the author of numerous publications on selecting, implementing and managing investments.
Tokufumi Kato, PhD, Managing Director
Fumi Kato, PhD, Managing Director, joined the firm in 2009. Fumi is Head of Portfolio Construction and Risk Management and serves as a Portfolio Manager in the Multi-Asset Class Investment Team. He is responsible for portfolio construction, asset allocation, risk management and daily management of multi-asset class portfolios, as well as cross-asset class research and idea generation. Fumi also sits on the firm’s Asset Allocation Committee and the Model Risk Subcommittee. Prior to joining the team, he was a member of the Investment Strategy and Risk team, where his focus was multi-asset class solutions for strategic partners and global institutional clients. He also worked at Neuberger Berman East Asia, where he was a client portfolio manager for strategies across asset classes. Prior to joining the firm, Fumi served as a quantitative analyst in the Investment Management team at SPARX Asset Management. Fumi earned his BS in Physics and Mathematics with honors and holds an MA and a PhD in Physics from State University of New York at Stony Brook. Fumi is on the Board of Directors of Asia Initiatives, a 501(c)(3) nonprofit organization.
Hakan Kaya, PhD, Senior Portfolio Manager

Hakan Kaya, PhD, Managing Director, joined the firm in 2008. Hakan is a Senior Portfolio Manager on the Quantitative and Multi-Asset Class (“QMAC”) team responsible for Global Risk Balanced Portfolios and Commodities. He contributes to asset allocation research with a focus on risk management and has a record of publishing research in both refereed journals and white papers on timely investment issues. Prior to joining the firm, he was a consultant with Mount Lucas Management Corporation where he developed weather risk and statistical relative value models for commodities investment. Dr. Kaya received BS degrees summa cum laude in Mathematics and Industrial Engineering from Koc University in Istanbul, Turkey and holds a PhD in Operations Research & Financial Engineering from Princeton University.

David G. Kupperman, PhD
Co-Head, NB Alternative Investment Management
22 Years of Industry Experience
10 Years with Neuberger Berman
Ugo Lancioni
Head of Global Currency
26 Years of Industry Experience
13 Years with Neuberger Berman
Suzanne F. Peck
Head of Investments – Private Wealth Management
26 Years of Industry Experience
Raheel Siddiqui
Senior Research Analyst
24 Years of Industry Experience
17 Years with Neuberger Berman
David G. Kupperman, PhD, Co-Head, NB Alternative Investment Management
David Kupperman, PhD, Managing Director, is Co-head of the NB Alternative Investment Management team and a member of its Investment Committee. He is also on the Investment Committee of the Specialty Finance Group which he co-founded after years of investing experience in the consumer credit space, as well as Chairman of the NB Insurance-Linked Strategies Underwriting Committee and a Director of NB Reinsurance Ltd. David also sits on the firm’s Asset Allocation Committee, the Investment Risk Committee and the Model Risk Subcommittee. Prior to joining the firm in 2011, David was a partner and member of the investment committee at Alternative Investment Management, LLC. Before that, he was a managing director and member of the executive committee at Paloma Partners Management Company, a multi-strategy hedge fund focused on relative value trading strategies. Previously, David was a principal at The Carlyle Group, one of the world’s largest alternative investment managers. Prior to joining Carlyle, he was a vice president in both the private equity and portfolio strategy groups at Goldman, Sachs & Co. In his portfolio strategy role, he authored papers on asset allocation and helped develop Goldman’s quantitative asset allocation framework for high-net-worth investors. David is the Chairman of The Johns Hopkins Physics & Astronomy Advisory Council and is a member of the Cornell University Council. David holds an MA and a PhD in physics from Johns Hopkins University and a BA and an ME from Cornell University.

Ugo Lancioni, Head of Global Currency
Ugo Lancioni, Managing Director, joined the firm in 2007. Ugo is the Head of Global Currency and serves as Senior Portfolio Manager on Global Investment Grade and Multi-Sector Fixed Income strategies. He sits on the firm’s Asset Allocation Committee and is a member of the senior investment team that sets overall portfolio strategy for Global Investment Grade. Ugo leads the Currency team in determining FX exposures across various portfolio strategies. Prior to joining the firm, Ugo was employed by JP Morgan for 11 years. At JP Morgan AM he worked as Currency Strategist and Portfolio Manager in charge of the FX risk in Fixed Income Portfolios. Prior to this, Ugo worked as a Trader at JP Morgan Bank, both in London and Milan, in the short term interest rate trading group (STIRT) where he was responsible for foreign exchange forwards market making and rates derivatives trading. Ugo received a Master’s in Economics from the University “La Sapienza” in Rome.
Suzanne F. Peck, Head of Investments – Private Wealth Management
Suzanne F. Peck, Managing Director, is the Head of Investments for Private Wealth Management at Neuberger Berman, and a member of the firm’s Asset Allocation Committee. Prior to joining the firm in 2021, she was Head of BlackRock's Endowments and Foundations effort, which provides investment management services and risk advisory solutions to endowments and foundations, including outsourced CIO services. Prior to joining BlackRock in 2013, Suzanne spent 18 years with Goldman Sachs, most recently in its Investment Management Division, where she served in a number of roles including Portfolio Manager and member of the Investment Committee of Institutional Client Solutions. She also led a team that built an outsourced CIO offering for endowments and foundations. Previously, Suzanne spent nine years in the Investment Banking Division. Suzanne serves on the Investment Committees and Boards of UJA-Federation of NY and the New-York Historical Society. She earned a BA in history from Columbia College, MA in economics from New York University and MBA from Columbia Business School.
Raheel Siddiqui, Senior Research Analyst

Raheel Siddiqui, Senior Vice President, Senior Research Analyst, joined the firm in 2004. Raheel is the Portfolio and Quantitative Strategist in the Neuberger Berman Global Equity Research Department. In this role he researches impending inflection points in the business cycle, risk appetite, inflation, global asset classes, US sectors, style (growth vs. value), and size to enhance fundamental stock selection and portfolio construction processes by taking advantage of emerging trends not fully appreciated by the market. His research spans finding systematic ways of distilling leading or confirming messages from macroeconomic, quantitative, derivatives data, and behavioral data as well as periodically evaluating portfolios for efficient asset allocation.

Prior to this role, Raheel was a part of Lehman Brothers US Equity Strategy Team where he co-authored over 100 strategy reports, many of which were quoted in the Wall Street Journal, Financial Times, and Barron’s. Raheel also worked as a senior member of the Corporate Development team at Monsanto for six years, where he developed industry leading and award winning approach for valuing genomics assets.

Raheel earned MS/BS degrees in Biochemical Engineering from the Indian Institute of Technology and an MBA from Columbia University. Raheel has also been published with the American Institute of Physics.

Accolades referenced are issued by independent third-parties and information regarding specific criteria for accolades is available upon request and generally may be found on such third-party’s website. Barron’s rankings are based on a proprietary formula that considers various factors: assets under management, revenues generated by advisors for their firms, and the quality of the advisors’ practices. Investment performance is not an explicit criterion because performance is often a function of each client’s appetite for risk. Third-party accolades referenced do not reflect the experiences of any Neuberger Berman client and readers should not view such information as representative of any particular client’s experience or assume that they will have a similar investment experience as any previous or existing client. Third-party accolades are not indicative of the past or future performance of any Neuberger Berman product or service.

Robert Surgent
Senior Portfolio Manager
29 Years of Industry Experience
1 Year with Neuberger Berman
Brad Tank
Chief Investment Officer—Fixed Income
40 Years of Industry Experience
18 Years with Neuberger Berman
Anthony Tutrone
Global Head of Alternatives
33 Years of Industry Experience
33 Years with Neuberger Berman
Robert Surgent, Senior Portfolio Manager
Bob Surgent joined the firm in March 2020 as a Managing Director and Senior Portfolio Manager working in the Multi-Asset group. Prior to Neuberger Berman, Bob was a Managing Director at Goldman Sachs managing the Multi Asset Tactical Portfolio for GSAM's GPS Group where he was a member of the Investment Committee providing input for longer term asset allocation decisions as well as shorter term absolute return opportunities. Previously, Bob was a Macro Portfolio Manager at Tudor Investments and a Global Macro Proprietary trader at Goldman Sachs in both the London and New York offices. Before joining the Macro Prop Team at Goldman, Bob was a member of the Equity Divisions Principle Strategies Group specializing in the European Tech, Telecom, and Financial sectors. Bob graduated with an MBA in Finance from the Wharton School of Business in 1993 and from the University of Pennsylvania in 1988 with a Bachelors in Economics.
Brad Tank, Chief Investment Officer—Fixed Income
Brad Tank, Managing Director, joined the firm in 2002 and is the Chief Investment Officer and Global Head of Fixed Income. He is a member of Neuberger Berman’s Operating, Investment Risk, Asset Allocation Committees and Fixed Income’s Investment Strategy Committee, and leads the Fixed Income Multi-Sector Group. From inception in 2008 through 2015, Brad was also Chief Investment Officer of Neuberger Berman’s Multi-Asset Class Investment business and remains an important member of that team along with the firm’s other CIOs. From 1990 to2002, Brad was director of fixed income for Strong Capital Management in Wisconsin. He was also a member of the Office of the CEO and headed institutional and intermediary distribution. In 1997, Brad was named “Runner Up” for Morningstar Mutual Fund Manager of the Year. From 1982 to 1990, he was a vice president at Salomon Brothers in the government, mortgage and financial institutions areas. Brad earned a BBA and an MBA from the University of Wisconsin.

Anthony Tutrone, Global Head of Alternatives
Anthony Tutrone is the Global Head of NB Alternatives and a Managing Director of Neuberger Berman. He is a member of all Neuberger Berman Private Equity’s Investment Committees. Anthony is also a member of Neuberger Berman's Partnership, Operating, and Asset Allocation Committees. Prior to Neuberger Berman, from 1994 to 2001, Anthony was a Managing Director and founding member of The Cypress Group, a private equity firm focused on middle market buyouts that managed approximately $3.5 billion of commitments. Anthony began his career at Lehman Brothers in 1986, starting in Investment Banking and in 1987 becoming one of the original members of the firm’s Merchant Banking Group. This group managed a $1.2 billion private equity fund focused on middle market buyouts. He has been a member of the board of directors of several public and private companies and has sat on the advisory boards of several private equity funds. Anthony earned an MBA from Harvard Business School and a BA in Economics from Columbia University.